Solve all problems "by hand". Do not work jointly on this assignment or "share" your solutions with your classmates, i.e., this is not a group assignment. Carry all calculations to 4 decimal places. Solve all problems using calendar time, i.e., 365 days in a year.

Consider a European call and put option written on a stock whose price is $67.75.

for both the put and the call is $67.50. The annual standard deviation of the stock returns (volatility) is .60, and the annual risk-free rate is 3.65 percent. The options expire in 224 days. The stock will pay a $11.60 dividend and the ex-dividend date is in 100 days. Using the binomial model compute the price of these options using a four-period tree, (where the stock price tree does not recombine).

Draw the stock tree and the corresponding trees for the call and the put.

What is the value of the European call and put options?